Jana Small Finance Bank Ltd (NSE: JSFB) Q1 2026 Earnings Call dated Jul. 22, 2025
Corporate Participants:
Unidentified Speaker
Ajay Kanwal — Managing Director and Chief Executive Officer
Abhilash Sandur — Chief Financial Officer
Analysts:
Unidentified Participant
Chintan Shah — Analyst
Manish Ostwal Manish Ostwal — Analyst
Ganesh Nagarsekar — Analyst
Shailesh Karnani — Analyst
Rahul Kumar — Analyst
Somil Shah — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Jenna Small Finance Bank Q1 and FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Chintan Shah from ICICI Securities. Thank you. And over to you, sir.
Chintan Shah — Analyst
Yeah, thank you, Shruti. Good evening everyone and welcome to the Q1FY 2026 results conference call for Jenna Small Finance Bank. First of all, I would like to thank Jana Small Finance Bank Management for giving us the opportunity to host their quarterly earnings conference call. From the management, we have with us Mr. Ajay Kanwal, Managing Director and Chief Executive Officer, Mr. Abhilash Sunda, Chief Financial Officer and other team members from the senior management.
So now, without further delay, I would now like to hand over the floor to the management. Thank you. And over to you, Jessa.
Ajay Kanwal — Managing Director and Chief Executive Officer
Thank you, Chindan. And good evening to all of you. I will make reference to the investor presentation that we’ve uploaded. I’ll even refer to the page numbers. Let me start by the first page of our application to Universal bank which happened on 9th of June. And that’s a very important step for us as we broadbase our product and customer base. I’ll swiftly move to page number three which gives you a sense of which state has Omni branches. And also to give you the information that we’ve added eight new branches in quarter one. We plan to open 70 branches this year.
We’re conscious on cost, so 30 of these will be new branches and the balance 40 will be relocations of existing branches so it can serve a wider customer base. First quarter, I’ve seen three product focuses from us which you can see on the right hand side. One is our ASBA launch. Second is the Solitaire savings account for women. And third is a digital offering called Ayvani which essentially is a sandbox on all the merchants and traders can use on their phones. So you really don’t need a sandbox, you just use our app. And our app converts your phone into a sandbox at zero cost.
So overall we are continuing to see growth in customers. We are ensuring that we are on track to launch our strategic products and we are increasing our branch network on very specific locations, conscious that it has to give us fastest value. I Go to page number four and I want to talk a bit about quarter one. It’s been a tough quarter because what we did think originally that the MFI stress was a bump in a hole. Unfortunately the bump was followed by a pothole. But we are more than determined to make sure that it crosses very swiftly.
And let me talk about that. So first is on secured assets. As you know, when we finished March we were on 70% of secured secured assets. Touchwood is firing very well and I say firing very well. It means that we will expect 35 to 40% growth this year as we have been doing in secured assets for some time. Our margins in the first quarter are steady so there is no drop in margins. In fact there is no drop in gross yield for the bank. It continues to be 16.5 and we’ll talk about that. Our credit cost in first quarter on the secured side and slippages are pretty much in line with expectations very close to Q4 which is on the better quarters.
Importantly, we did inform that we had invested in increasing our headcount and secured business last year. Mainly micro housing, affordable housing. We’d added roughly about 1,400 people fresh last year. We’d hired supply chain people. We had increased some more on the two wheeler side. So the focus on the entire hiring that we did last year is on improving their productivity. We’ll see nominal cost growth in secured only when we are hiring a used car and marginal increase about 150200 gold. So big deal on secured side is it’s running well. We’re very comfortable with what we see in terms of what’s coming through in credit cost, getting share and cost pretty much done and dusted for the year.
Unsecured. We had all three lines working against us for the last 12 months. And if you add this quarter it’s now been roughly 15 months. First was the revenue challenge where we saw a drop in unsecured book last year roughly about 10%. Our book has dropped by another 2.5% this quarter. But we do see given that we are in midst of July that we should see a flat to slight increase in this quarter. So I feel at least one side of revenue which is seeing the book drop in revenue go down. We will see some improvement in the coming quarter which is Q2.
Our criteria are extremely tight of onboarding so that is one of the reasons we are not able to grow faster. But to our mind this tight criteria is a short term thing. We do think the industry is not completely cleared up. We would like to make sure that we are very on the tight end of a credit card of our credit criteria for new onboarding on the credit cost. While we did know that every April is a negative, we continue to see fresh flows. We have seen a pickup of fresh flow to NPA in the quarter four.
We did see a marginal increase in quarter one. Now that’s not. That wasn’t a good thing for us because purely because Q4 was not a low flow. So Q1 this year has similar. The way we look at it is Q2 the flow will come down but in Q3 we see a significant slowdown. So for the second line which is credit cost to meaningfully reduce it will be quarter three. We continue putting our portfolio under the guarantee program and 36% of the unsecured portfolio is under the guarantee program. The third lever here was a cost because when NPSR is rising and so did delinquency, we had to add people in collections.
Those costs have plateaued. So if you look at secured or unsecured, we don’t see any cost increase falling. What we see as a current run rate on the deposit side, we took our time in pushing the deposit out as we did see an interest rate cut coming. Our growth has picked up from May. We’ve also done pricing cuts on deposits roughly. Not roughly Exactly. It is 8.25% in March is now at 7.75. So we’ve done a 50 basis point cut. We do expect to certainly meet our 20% target on deposit growth with CASA at 20%.
And we would see the cost of deposit pricing getting positively impacted from Q2 onwards. We’ve already spoken about our branches and about the segment launches. I’ll move on to slide number five which shows the path of the bank. Our regulatory provision is 46 crores. It is lower than last year. Last quarter of 76 we have increased our accelerate provision to 150. This ensures that both gross NPA remains below 3, net NPA remains below 1 and we are well capitalized. It’s fair to assume that the regulatory provision is lower because we did have accident provision done last year which had been used up.
So our pat is at 102. If you add back the excellent provision it should look at 250 gross NP at 2.8. Net NP remains at 0.9 with PCR which is at 69.1 for the secured which as you all know is on the higher side. But as you do accelerated provision, there are little choices left. You have to provision secured because security is the biggest portion of our balance sheet. So naturally when you really want to keep gross NP and net NPA below 1, you have no choice but to increase more secured PCR and unsecured continues at 89.7 very similar to what it was in quarter four.
So overall if you look at the numbers it has been two three key challenges here. One has been of course the NTA which has forced us to put some more excellent provision. It has been the revenue shortfall from a negative unsecured book. Other than those two parameters which are largely industry specific though we did think we will get out of this position faster and Raman who’s with me and looks after our micro finance business will talk more about when we go into Q and A. Those are really the two challenges that we see in quarter one.
Not new challenges but we didn’t think that quarter one would not resolve it. We continue to put more effort behind it. We would say from quarter two now that we would see a start seeing a drop and that book stabilizing on unsecured I swiftly move to page number seven. That’s the important page we talk of every time. Our affordable housing micro lot book is at 12,000 crores. If you take our we did have a exit on odfd roughly about 600 odd crores if you take secured growth excluding this ODFD we are at 6% so we are very steady in our growth.
Our big businesses of affordable housing, two wheeler loans, gold loans are doing very well. I just want on this page just give a clear expectation what we should anticipate then we finish the first half. The total secured advances now show that in Q1 we have done 3% this should show up to 12 to 13% minimum when we finish this quarter. There’s small blip in MSME which has nothing to do with the business. The planned exits happened and last one or two of the larger supply chain customers onboarding got a bit delayed. In MSME loans which shows a quarter on quarter of minus 1.3 you will probably see a 10% to 12% growth as we finish the first quarter.
Sorry, the first half. So what are very important on this page is we are our secured business which is now 71% most likely will be in the 72 73% range when we finish first half. Our secured business which shows a 3% first quarter growth will show most likely a 12 to 13% growth. And if our plans and what we see currently works the way we are working our unsecured advances growth which is negative 2.5 should at least become zero when we finish the first half. So by giving you the expectation the first half, which is very near and very obvious, I really want to reiterate that the guidance given on 20% asset growth, we are certainly on track to meet that in the shape that we’ve always talked of, which is moving secure to 80% while you would like unsecured to remain at 20% which is our plan for some time.
I’ll move on to an important slide we always talk of which is slide number 10 where while we do talk a lot of products, our competitive advantage, our operating leverage always has been more business with the same customer. And as you can see very clearly from page 10 that whether it is CASA or pre approved business loans or gold penetration on every single parameters, there is more and more absorption of multiple products by customers across the bank. I want to not Talk of page 11. This is the one we show each time we have added a new important box.
On page 11 you can see that 2,535 crores of our portfolio was guaranteed till March 2025. The NPA in this book is about 6.6 crores. And we should be seeing some recovery from this starting August 25th. And the balance which is a bigger book of CGMFU from July 2026. But I really want to flag this off that as we look ahead we do expect unsecured book to grow. We do expect NPA to get better, we do expect our own recoveries to improve. And we also expect the guarantee to start giving a minor benefit this year and bigger benefits in the following year.
We continue providing our or keeping submitting our books for guarantee program. And right now we have reached 36% of our total unsecured book under the guarantee programs around it shows that we should be closer to 45 to 50% of the book under the guarantee program by end of this quarter. I want to then swiftly move on to our deposit grades. Page number 13. We are very liquid. Liquidity is not our concern. We are able to grow very fast. We really put more growth, more focus on growing deposits. Effective May, when we did cut the rates, we first cut from 825 to 805.
And the second cut we did from 805 to 775 which is in vogue now. CASA quarter and quarter is not grown, it’s flattish. But we do expect to see a double digit number on when we finish the first half. And I can say that with great amount of confidence because most of that growth we already seen in our numbers as we sit here in June, sorry July. So as we sit here on nearly the last week of July coming up, we would see a double digit CASA growth for the first half by itself time deposits.
We can clearly see the pricing is coming lower. So two things you can expect in quarter two when we finish the first half our cost of deposit should show a drop. Our CAFA should show a double digit and we would like to reiterate our guidance for a 20% growth on the business side. On the liability business side I want to do a quick stop on page 15 again on the digital there is clear focus. We are doing everything digital that comes in our mind and i1 is a classical example where we have innovated for our customers where they don’t have to spend on sandboxes and can use their mobile phones and there are a lot of other features which are very valuable on it.
I want to move next to page number 19 which is the financials page. Here you can see on the right hand side yield and NIMS. The yield on the book continues to be 16.5. Our limbs are lower because a portion of our book which we have sold at OMO were at higher yield. Our investment book and the yield has come down because obviously when you reinvest it the same yield doesn’t exist but the customer yield hasn’t shifted. As you go into Q2 we will see a drop in cost of deposits and cost of funding that should add to this number.
And of course with unsecured gaining back the 2.5% loss of portfolio that should also make the name better and we should if all goes well certainly cross the 7% in a very decisive way. In terms of net interest margins I want to talk of page number 20 and this talks about our credit cost. We have shown IT earlier which is 46 is a regulatory provision. We have done an excellent provision of 150 before declaring a PAT of 100 after considering our recoveries and the other income of 31 and of course minusing 150 which is for a variety of reasons A credit card looks at 15.
Explanation of gross NP and net NP are given below. I must say that of the 196 crores of credit cost, 90% is used for unsecured assets. Only a very small portion has gone towards secured because the book on the secured side in the first quarter was literally as good as quarter four marginal drop. You can see our gross NPA and net NPA numbers are on this stage and how we have Arrived at the number clearly the big addition is coming from the unsecured change in the quarter one. I’ll move to page number 21. Here you can see net NP of secured is at 165 crores.
It’s dropped from last quarter. It used to be 176. So like I said secured is really working very well for us. Unsecured is well provisioned and we continue to hope and we are working towards a drop in Q2 though we will see a significant drop in Q3. You can see our PLL page very clearly here. We have seen increase of other income in quarter one. We normally have better income in quarter one. There has been a change in accounting where we have normally on a PSLC when we sell we till last year were using the entire income in the first quarter.
From this year onwards we are amortizing it into four quarters so there is another 50 odd crores of TSLC sale which will come in quarter two, quarter three, quarter four roughly about 18 crores each. That’s the only change and other than that we’ve had a very good other income which actually helped us improve our exit provisioning further. As we move on to the balance sheet page which is page number 19 we continue to have good cash balances so we are very liquid. The folks who have noticed it earlier on the deposit page our LCR is at 171.
We did speak in the last few investor calls that we would like to normalize our LCI below 200 as a liquidity position improves. We are doing so. Sorry, balance sheet page is 23 and I’m reading of 23 page. My apologies. We continue getting long term financing from SID, the NABAD and NHV and we do take small amounts because as you know we are very liquid so we don’t really need to take too much borrowings any longer Though given the cost of deposit and the length of deposit which helps our alm, we do take small amounts every now and then.
That’s the guidance page I think AUM and deposits we’re very confident but let’s give us a quarter. We’ll talk more about when we reach there and that will directly impact the ROAS and the roes. There is nothing significant change beyond that which I would like to mention. So I really would like to close now so that we can open ourselves to questions and answers. In closing I can only tell you that it’s been a tough quarter purely because of the MSI stress. Other than that we’ve had a good execution. Very clear of growing our strategic path on secure.
That hasn’t changed. Customer path hasn’t changed, the digital path hasn’t changed. And we finally see light at the end of the tunnel with Q2 being better in MFI versus Q1 and Q3 being significantly different.
With that, I will stop and open the floor for questions. Thank you.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Session Anyone who wishes to ask a question may press Star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue is handled. The first question is from the line of Mani Chotswas from Nirmal Bank Securities. Please proceed.
Manish Ostwal Manish Ostwal
Thank you. Good evening. Thank you for the opportunity. My question on the margin side you talk about in your commentary the margin has not declined but it has declined from 7.4% to 6.9% and in this quarter we continue to see pressure on your unsecured debt which has declined at 2.5% and today only there is a company and similar in sector decline numbers and both in terms of book that is flat in terms of MI growth is 7% and there’s a decline of credit addition to the gross npa. So when I look at there are small finance bank performance it is industry players are saying showing some improvement in the metrics but in general there is no improvement in the metrics whether it is ni, whether it is margin, whether it is asset quality.
So what is your comment on that? Why there is some green shoot in some place in the industry that we are not seeing in Jena and so what is your comment on that thing?
Ajay Kanwal
So Manish, fortunately for us our unsecured book is only 30%. So if you are comparing to green shoots of somebody who probably 100% MFI, it could be different because you know at the end of the day our customer Yield is at 16.5. That hasn’t changed. Our book is down 2.5% and it’s possible some dedicated MRFI player has seen an increase. But like I said, it’s different strokes for different folks. Because listen, if I want to grow the book, I have to reduce the credit norms a bit and I can grow the book faster. I’ve chosen not to do that because I don’t think so.
We are ready for that right now. As you know that if growth is an objective it certainly can be achieved but it could be a bit expensive later. And that is not where we would like to be. So I would suggest Manish that we should look at a comparison for like to like players. So if you go to our slide and see that the customer 16.5 is still the same it does show you that all the pricing is holding up. Green shoots. Absolutely. We should expect green shoots Manish. It will come from as unsecured book grows.
It will come as you see Q2 and this should happen in Q2. We should see Q2 certainly NPA getting lower and like I said significant drop in Q3. And very importantly for us like I mentioned our secured growth rate in absolute terms at 12 to 13% when we finish first half are the real groom shoot because they are more sustainable in longer term and certainly a safer business that we would like to bank on.
Manish Ostwal Manish Ostwal
Okay, second question on the cost increase. So like 26.4% growth in employee expenses and 7.3% quarter to quarter. So this cost is mainly annual appraisal revision or there is a further increase of the collection team for the effort. So and because the volume growth is not that high so the cost on employee sets with a higher side compared to the even other expenses growth is 4.7%. It is also when you look at the balance sheet growth only 2.3% only.
Ajay Kanwal
Yes. So I think it’s a fair question on cost which is why Manish, when we cited the first slide itself I said our cost is going to be plateaued here or rather an increase in secured side because we are kind of fully loaded for the year. Yes, the first cost increase on the people side is the hiring we did in Q4 for collections and Q3 for collections last year. So they are flowing through into our cost into this year. There is a salary increase which we normally expect but other than that there is no other specific cost on cost increase.
On the other side we did have to buy some PSL certificates which if you see the sale of the PSL comes on the income line but if you buy anything it goes on the cost line. So that is a bit of one off in the first quarter. Sorry, why didn’t you other opex there’s no increase the increases through which as I mentioned that’s the only OPEX increase over the last quarter. Main increase is coming from the payroll which is directly linked to the appraisal side. So other opex is really flat 214 crores to 215 crore.
So that hasn’t changed from the numbers and the numbers Abhilashi just put in front of me. So there’s no real change there. It’s basically payroll and payroll like I mentioned earlier because we had already accelerated our hiring both in collections and our secured business. We are kind of full capacity now which is why you can see like for example affordable housing has seen a very strong first quarter growth. If you probably look at a peer group which is 6.5% growth in affordable housing quarter one itself. So you can see the results of higher people equal to higher volume in Q1.
And you will see as we go ahead when the cost is flattish slightly negative as we go into the various quarters what we anticipate.
Manish Ostwal Manish Ostwal
The last question I have is bit of strategic in nature. So there are three banks have applied universal bank license including you. So my question to the management team is what is. We all understand the universal bank license the long term benefits but the point is the current focus should be shape the business more profitable because we are growing the balance sheet but the profit is not coming. Not I’m not talking about the PAT level, I’m talking about year one NI is not increasing at all for last so many quarters it’s quite flattish from quarter two onwards. 593 was the quarter two F25. Now it is 595. So I mean growth without increasing profit. How can you justify that? Thank you.
Ajay Kanwal
So much. I think we should not mix it up. By which I mean listen, from last quarter when NFI stress has begun we have seen the book drop by 10%. And when you see a 10% drop in book roughly about a thousand crores at 24% yield it’s unlikely that we will able to recover that in the short term from a secured growth of assets. So I want to assure you that none of us are growing for the sake of growing. But at the same time if there is stress in mfi there is little chance that we will make that up from in a 9 month or a 12 month time frame from secured growth.
But the margins are of course smaller. But. But as you know very well this is the right business to grow as far as Universal bank is concerned. It doesn’t change our focus on our business at all. Universal bank application as you are aware Manish is based on a few criteria decided by RBI which frankly are pretty much bau. Whether it’s gross NPA net NPA diversification of asset net worth or a capital adequacy. So none of it. So just to make sure that you should not feel that our application as Universal bank has caused us any reason to do Anything different than what we would have done normally.
Second, universal bank is not a long term benefit. I would say it is a very immediate benefit. Moment you get should certainly improve the velocity of CAFA and deposit in your bank. It should very immediately change the cost of deposit that we get as a bank. There are some benefits I will not put a number to whether it is employees or investors or customers at large or what they think about the bank and its brand which will have indirect benefits. So I really want to clarify two things to you because if you see our numbers you can see very clearly that the secured names haven’t dropped.
The secured business has grown. The only impact on NI is unsecured negative growth. So I do not think we should misassume NI growth as anything else. And second, on universal, I do think it is very valuable as a license to be a universal bank and it is not defocusing us and the benefits would be from the day that we are awarded that license.
Manish Ostwal Manish Ostwal
Thank you very much for answering all my questions. Thank you.
Ajay Kanwal
Thanks.
operator
Thank you. The next question is from the line of Ganesh Nagar Sekhar from Bharat Bhat Research. Please proceed.
Ganesh Nagarsekar
Yeah, so my first question is regarding our two wheeler book. So that is one part of the business that we are growing quite aggressively and historically in some of the other peers that operate in this segment, credit, cost, etc could be a challenge. Right. So wanted to check how we are trying to ensure that the kind of lending that we’re doing here is kind of quite secure. And I think in one of our earlier interactions you’ve mentioned that a lot of these loans are kind of cross sell to the housing clients as well. So is the collateral for the housing used for this as well or how do you typically think about that?
Ajay Kanwal
Yeah, so first let me. So thanks for the question. Let me first clarify the two wheeler PC. We operate roughly in 185 cities.
Ganesh Nagarsekar
Got it.
Ajay Kanwal
As a bank. And when we launched Two Wheeler we began with the first 30 cities, then we took it to 60 cities. I think the last I remember we had put a stop around 120. We have not even reached 180 cities that we are available in. So when you see growth it is not about such being aggressive. It is also about going to new cities where the bank exists and introducing a new product. I am saying this because when you grow fast you can assume that somebody is either over aggressive or taking some light decision on credit which is why gross NP has been holding up very well.
But we have been placing a growth based on number of cities Here, not because we took any credit which is extra. Second is do we give two wheeler loans to our good customers, whether they are micro lab or affordable housing or they are even our good MFI customers, our good gold loan customers savings account. Of course we do. Roughly 15, 20% of the book is there. And that book is a cool advantage because you obviously have more insight into the customer than somebody who walks in as a fresh customer to us. So my takeaway for you is, listen, we have seen this book.
This business was launched after wave one of COVID So we did see some not so good numbers post wave two. It’s been a few years. Our scorecard, which we use in addition to the Bureau for two Wheeler, is our second generation scorecard. So we’ve had a first scorecard, we remodified it, made it better. We are on number two now. So nothing that we can see in our two wheeler businesses stopping us to say it will grow, it will continue growing purely because we will expand geographically and we should continue to see good numbers and I think should make us feel very differently about it.
Ganesh Nagarsekar
Understood. So my second question is regarding our casa, so that I notice is kind of growing a bit slowly and that’s been a challenge for us for a few quarters now, despite us having relatively. Good urban branches, etc. And I think you’d also mentioned that you’re not kind of looking to just grow that by kind of giving higher rates, et cetera, so broadly. How are you thinking about the CASA piece? And I think you mentioned growth. Starting Q2, Q3, the CASA book will kind of start growing quite well. So incrementally, what are you doing that will kind of change the rate of growth in casa. And how do you think we should think about that? A few quarters down.
Ajay Kanwal
Good. So listen first, you’re very generous. Our CASA growth is 0% in the first quarter. So every reason for us to feel not so delighted about it. But see, first is CASA growth was through affluent segments. And to attract affluent segments, we launched a series of segmental offers. The last one was Solitaire, which was a specific segment for women. Prior to that we have launched Legend for senior citizens. We have launched Premium banking. And before that we have launched exclusive. We’ve also done NR where we have to do a full launch, but that’s the last piece that we’re going.
So series of segmental offers, some specific branch opening, which is why I said we’ll open 30 new branches this year. We have done similar numbers last year for new locations and of course more Work. We are well endowed in mobile banking. Banking. So I’ll give you some numbers and give you a sense of why it will be different this year. See last year we grew the deposit book by 20, 32%. This is time deposit. We grew CASA by 18% last year but the deposit grew much faster than CASA book. So CASA percentage came down here.
We want to do a slight reversal which is we would like to grow CASA at at least 25% and we would like to see time deposit to grow less than 25. So, so there are percentage changes. Like I said, we are now in nearly end of July. I would think we can see that we will at least add 10% to CASA growth for first half. I think that will give all of us enough confidence that we will grow at the 25% range on CASA for this year. Now that the money market is liquid and there is no need for us to be conservative on deposit side.
We would not increase our time deposit growth at that pace as we did last year. You can also see that the LCR which was around 250 odd percent last year is down to 170. So clearly the change in the market liquidity has prompted us to make sure that we try and now save some basis points on callable versus non callable deposits which is also done for the first quarter. So all in all I would give you comfort saying we are liquid, we are in the right environment to grow because it’s a low cost environment starting hopefully get probably a bit more lower cost if at all.
But we are happy where we are and we would like to see some CASA and time deposit growth and you will certainly see it by end of September.
Ganesh Nagarsekar
And if you could just squeeze in one last question. So I think it’s just been a month or so since we applied for the universal bank license. But any comments from the regulator till now about any challenges that they may. Have, any issues that they have or. Any comments that you heard back from the regulator on the universal license front?
Ajay Kanwal
There is very active engagement. There is nothing that we heard the problem. As you know, they have given a hurdle of who can apply. We met a hurdle, we’ve applied, we put a five year plan. There is active engagement and there is nothing which tells us now that is anything different than what we knew two months back. .
Ganesh Nagarsekar
Understood That’s it from myself, sir. Thank you so much.
Ajay Kanwal
Thank you.
operator
Thank you. The next question is from the line of Shailesh Karnani from central booking. Please proceed. Hello.
Shailesh Karnani
Yeah. Is this better?
operator
Yes, sir.
Shailesh Karnani
Yeah. So my question with respect to VC. Book. I believe there is a rundown in the book quarter on quarter still the CNPA keeps on adding so how are you placed over there and can you throw some color on that?
Ajay Kanwal
So sheilish the BC book is dropping because you know the BC book uses the same credit criteria as the bank uses which is if you have more than 50,000 rupees unsecured outstanding with any player outside of us then we are not giving the person unsecured loans which makes us very conservative to the 2 lakh guardrail put up by the infin and because that’s the norm that the bank would like to use so that we really don’t build again an over leveraged book for the sake of growth we do see the book the BC books not growing.
The second reason the BC books are not growing is you know the larger bcs who had NPA challenges are still focused on collection there and it will be unfair for us to kind of push them for growth when we know that the collection cycle for them hasn’t bottomed there. And I can see that that should bottom out for them also at least one of them has already bottomed in Q1, the other two I would expect in Q2 and then we will see an overall growth. I must tell you that having learned from the BC experience we are still continuing with the BC growth and we have the extra guardrails that we have to put around bcs which are not credit guardrails but slowing down their growth, not letting BCS go faster than an X amount.
That’s additional garden that we put from going on from going from here on. I must also tell you that every B.C. who was our B.C. before the crisis had NPA challenges continues to be our BC which means that they would like to get their money back or what they’ve lost from customers and they would like to continue the partnership and we are very fully supportive of it. So none of the bcs have said oh you know my FLDG is busted. So thank you very much. It’s your problem now. They’re very actively working on solving the issues.
Shailesh Karnani
But just on the quality front, 18% GMP I understand even if it’s a rundown still the amount is kind of increasing quarter and quarter. How what do you think when this increase in GMP will kind of rest? And how is the power book over there? Because quarter on quarter there is consistent increase still.
Ajay Kanwal
Yeah, see the book has run down much faster than our book as you can see. You know their book was around 2500 crores is down to give me a second. I think year on year crores. They’Ve dropped 30%, we dropped 10%. So their book has dropped much faster and which is why they are so that is one of the main reasons of gross NP increase. Like I said, there were three challenges. Only three DCs challenged. One is stabilized which means he’s not adding to gross NPA. Second, the other two need to stabilize. Once they do, then you will see the change. Our anticipation is by Q2 you will see the change. We hopefully see some growth in B.C. book along with us. I think they’ve also got used to a different credit criteria than they were used to in the past.
It needs a realignment of what is the amount of rejection rate and where do you focus and whom do you say yes, whom do you say no? Because all of us are used to a much easier credit criteria which was applied last year. So that adjustment factor to my mind is over. And you should see Q2 as a BC different answer.
Shailesh Karnani
Okay and just. Just to conclude with this part, what gives us the confidence that second quarter would be better means are we seeing any uptick? Because I remember fourth quarter also the commentary was in general then the first quarter or the month ending to the quarter were kind of good in terms of pickup and general macro commentary was kind of positive. Any quantitative numbers you can provide which gives us this confidence that the second quarter should be better?
Ajay Kanwal
I’ll give you April B0 MFI collection is around 96.4. May was about 98.99 and June is 98.8 or 98.7. So if you just see the April 3 odd percent drop in the B0 that is kind of been our challenge. Which is why we say the significant drop of NPA will only happen in Q3. We will see a drop in Q2 though, but not as significant as what we’ll see in Q3. And the B0 numbers give us that confidence. On the dispersal side as we sit here finishing July, this will be the highest dispersal month we’ve had this year.
So it is higher than what we had in April, May and June. So that gives us confidence that the book will start turning positive. And Shailesh, I must say even now we are going to remain conservative in the credit card we do to onboard customers. I did hear from the other analysts that, you know, people are probably showing more growth or faster growth. I have asked will still be more cautious here.
Shailesh Karnani
Okay, just the last question from my side 1. I have seen a huge uptick in terms of term loans to NBFCs on quarter on quarter basis. Still it is small in terms of overall scheme of things but still 2000 crores is the NBFC book. Now what is the yield? What we get over there and also on Micro Lab there are certain pockets which are showing stress any color if you can throw on mat.
Ajay Kanwal
So first NBFC roughly around 1987 is like 6 to 7% of our total book. Second, NBFC has been not a single day delinquent, forget NPA in the last seven years. So we are very mindful if you watch our last first quarter last year also see first quarter is normally slow growth of assets and we tend to pick up the NBFC lending in the first quarter second quarter and then we slow down Q3, Q4 certainly because our own lending picks up a lot. So there is no other reason except that we have liquidity, we have good clients.
The Yield is around 12% on the NBFC book. We know our NBFCs because we are in the same business. So we know exactly what our clients are doing because we obviously compete with all of them in the market comfortable doing that. And purely we have always said this, we still would say that it’s a more tactical answer to the balance sheet rather than a strategic answer. So that view on NBSC hasn’t changed because we’ve got enough of our own business to grow. So it’s more a timing issue. On Microlab listen, we don’t see any generic issue and I would say some people did ask me Last time also MFIs are becoming micro Lab customers due sea stress et cetera.
No, we did not see that in the past. We did not see it in the first quarter also and we’re very happy with what we have seen in the unsecured delinquency in the first quarter. So nothing is in fact we were happy with the way what numbers we did see. We always have some geographies which bother us a bit more than other geographies. You know we are in 25 states so not all states perform similarly. There’s a lot to do with some execution on the ground. So states where we have a challenge then we tighten the credit criteria.
We look at our processes, we look at our leadership, we make changes. We’ve done that to a few geographies last year. I’ll give you the specific names. We did have a small challenge in Odisha for example, which we now see behind us. We had a minor blip in a few districts in Gujarat it’s now behind us and we certainly did go slow in Karnataka in Q1 given all the external factors that were happening. We did see a small blip in the smaller loans in Karnataka. Again we’ve addressed that, but nothing which is a larger micro lab issue of, you know, something that could cause us to be cautious or change criteria or be anything harder.
I must also tell you that our third generation scorecard for affordable housing and Microlab that is the scorecard which is used in addition to using credit bureau will go live next month. So if at all we would have a even better book going forward because our new scorecard is obviously much better than the last scorecard too.
Shailesh Karnani
Thanks a lot sir and best of luck.
Ajay Kanwal
Thank you. Sh.
operator
Thank you. The next question is from the line of Rahul Kumar from Makala. Please proceed.
Rahul Kumar
Yeah, hi. So for the unsecured business, what was the SMA 1 and 2 for this quarter and can you tell us the corresponding figure for the last quarter.
Ajay Kanwal
While the folks dig out the number? Do you have a follow up question or any other question other than the unsecured book?
Rahul Kumar
Actually I had one more data question but also wanted to know the split of the slippages and provisions between the secured and unsecured which we have done for this quarter.
Ajay Kanwal
Yeah, so like I said, 90% of all the provisions have gone to unsecured, 10% has gone to secured. That’s an easy one. In terms of slippages we are nearly flattish to quarter four on secured. On unsecured the deterioration is roughly about 15 to 20% over quarter four and that is mainly coming out of the April B0 of 96 then flowing in. So those are the two quick points. Having said that, as you know that since we have been providing very regularly accelerated provision well covered on the provision side which you can see in the PCI numbers.
Rahul Kumar
Okay, and do we also have the significator for the write off between secured and secured?
Ajay Kanwal
Yes, give me a second. Just one sec. Abhinasha CF4 users we’ll just tell you the numbers.
Rahul Kumar
Sure. Yeah. Meanwhile actually also wanted to understand what proportion of our book is actually repo linked and how much have we have already passed in in terms of the.
Ajay Kanwal
Sorry, can you repeat the question? What portion of the book is referring.
Rahul Kumar
And how much was the
Ajay Kanwal
very marginal. Portion is repo linked? Because we do give the customer at the end of 39 months to choose whether they want to continue fixed or they want to do a repo linked. So I would think less than 20% would be repo link. Sorry. 6% Abhilashi corrected me is repo extend the benchmarking Excel TB linked 6% is the number.
Rahul Kumar
Okay.
Ajay Kanwal
94 on the on the write offs roughly about 100 crores on and about 10 crores on. Okay. For the tech writers.
Rahul Kumar
Okay. And if you look at the NEMS or for this quarter we have seen that it has declined 50bps while our yields are broadly flat or you know just 10 basis points down and the cost of fund is broadly flat. Right. So why are the NIMS declined 50 Basis points.
Ajay Kanwal
so which is why I did try but maybe Avilas you can help me see. Go ahead.
Abhilash Sandur
So when we sold the investments this quarter in the quarter one we booked a profit of almost 49 crores trading income. So when we sell these investments the high yielding investment goes up and when we purchase again the yields are low. So that will give an impact on the overall nims because when you calculate them it also includes the investment book. So that is the reason there’s a drop in NIM whereas we have booked a 49 crore upfront income as a trading income in the other income for the last quarter.
Ajay Kanwal
So you know three things happened AFL STM sale and OMOs that gives them the possibility to book this 49 crore. So they are nothing else. But that will this names improve from Q2 just because of us buying different yields, different securities. Well the security is a low yield. So what should happen in Q2 really is our cost of funds should come down, our unsecured should grow and our NPA should go lower. As you know all these are high yield at least. Unsecured is very high yield. So getting NIMS back up to where it were in Q1 or rather Q4 would be very easy.
The positive side is repo book roughly about 6% secured hasn’t seen any drop in yields and so which is 70% of our business. So we should not see any other impact from a yield perspective our bias it should improve in Q2.
Rahul Kumar
Okay. Okay, that’s all. Thank you.
operator
Thank you. The next question is from the line of Somil Shah from Paris Investments. Please repeat.
Somil Shah
Hi. Yeah hi sir. Good evening. So since last 3 4/4 we are doing accelerated provisions just so that our MNP is remain below one. So I would like to notice when we will continue doing this and as this as accelerated provision which we are doing that should also. There should also be reversals for this, right? But we are seeing any reversals.
Ajay Kanwal
You’re absolute right. See the problem is like this. Normally if you don’t have if you slip it is top. No. Then actual provision is like is helping you change the percentage. Right now what we’re facing is accident provision is some of it is already being used up by slippages. So once the slippage is slow down then the accident provision will just be a bunch. So when we need a slowdown I think it will certainly slow down. By Q2 it will be lower than Q1 and Q3 will be lower than Q2. For no other reason our slippages will be lower.
So I think those are the real in a normal circumstance, say there was no MFI stress, then we would need not put so much exit provision. Then hitting the 3% 1% mark would have been far easier. But now we are complicated with two things. One is there is an NFI slippage and we did think before the Karnataka issue began in Q4 that we’ve probably seen the worst. But unfortunately it did continue in Q4. Q4 has continued in Q1. Now we are seeing Q2 decline and we expect Q3 significant drop because then it would have covered up all the April flows.
So yes, exit provision will decline certainly because we will have less slippages and then we don’t need to put so much money to reach the 3% 1%.
Somil Shah
Yeah but then if we are seeing this as an accelerated provision then and if you feel that you know, out of this only 50% is going to come back, then this be a normal course of provision. Why you are mentioning it as accelerated provisions? Because see your shareholder, even this quarter when we are seeing your presentation, you are mentioning 250, 252 crores of pet if we add accelerated provisions. So I mean as a shareholder we feel that, you know, this accelerated provision will come back to us maybe 2/4 or 3/4 down the line.
Ajay Kanwal
So two things, you know. One is we have to for sake of giving transparency have to define what is regulatory and accelerated which is why we put them as very separate measures. Two is when we did start exit provision last year, there was hardly anything in our edge. Wasn’t clear that we’ll continue using it into this year which is where the case has ended up being. Otherwise we would have not need to put so much accident provision for sure even in the first quarter. Very difficult to predict last year what would happen this year. Otherwise like I said, it would not have been so much.
I don’t know a better answer. How can I, how can I put an exit provision which is okay out of this exit provision so much will get used and so much will get unused, probably will have much more clearer path. When we see Q2 and we see like you know, the final MFI status is better done, that will be easier for us to define and say okay, this one is like making ratio below one. I don’t see use of it.
Somil Shah
Sorry, continue.
Ajay Kanwal
There is no better way of us putting this as transparently as reported. I think going forward is guarantee money coming, less need of excess provision. And third is more recoveries by the bank in general. Because typically when delinquency improves then people get more focused on recoveries. When you’re busy trying to stop B0 from flowing, then you don’t have as much time for recoveries. So I think three things would change nearly simultaneously and we should see that from Q2 onwards.
Somil Shah
Okay. Okay. So basically once we get the Universal Banking License, they may be 1, 2, 3/4 down the line. So this accelerated provision, you won’t be doing it.
Ajay Kanwal
So first access provision is good in a stress environment. It shows that we have enough buffer and rather build a buffer and release them later rather than start with a less buffer. So I know that we do talk of 3% and 1% for Universal Bank. But very importantly for both you as an investor and me as a CEO is good to have some buffers when there’s a stress environment going on. If you don’t use the buffer, we’ll gladly release it and then. But do I want to have a. So it’s a timing issue, right? I don’t do actually provision.
I let NET NPA become 1.2. I do recovery and bring it below 1. That means I can declare more profits, provision less and then I give time to solve it. What we are doing now is rather than giving it that time, we are upfront putting up the cash and then saying that time will solve it. Now that time will be visible to all of us because we have been doing this for some time. As you know, we did 300 crores last year. We put 150 naira for 50 crores accident provision, it will be visible. We were hoping to be visible early this year, but hasn’t happened.
So I think we just need a bit of patience. But what I’m trying to say also is suppose I get Universal bank and there is MFI stress continues. There is no point of me not trying to, you know, give extra buffer provisions. If I can see the stress in the environment, I will still do it. Okay.
Somil Shah
And so my final question. So our names have come down drastically. I mean it’s current. I mean as the previous participant also asked you, it’s at 6.9%. So what do you see? Where do you see NIM stabilizing in this current year?
Ajay Kanwal
So we see around 7.2, 7.3% being the NIM including the first quarter 6.9. Okay.
Somil Shah
Because in previous calls I think you are mentioning 7.8 to 8% means we. Can achieve for this year
Abhilash Sandur
10.
Somil Shah
Our guidance.
Ajay Kanwal
So I have not given a guidance on him though I must have said it on the call. Let me tell you this. Let’s say we grow a thousand crores of unsecured in the next nine months. Net growth will be back to 7.8. That is all it takes. Okay. So you can name it the function of how much 24% asset you’re putting on there. And our NIM challenge, like I mentioned, we have been tracking it since last year. We have not seen a drop in nims on secure at all. All you have seen is a drop in unsecured book.
And second is the interest reversal when you have NPAs. Those are the two reasons why NIMs have come down. Moment those two change your NIMs go back up. So for us the issue is just solving the MFI NIM issue. Nothing on the secured side which we grow very rapidly is telling us that there is any new challenge coming out of secured book. And you can, it’s very easy. You just add up a thousand crores to the unsecured book and you see the nimble just shoot up.
Somil Shah
Okay, that’s it. From my side. Thank you and all the best.
Ajay Kanwal
Thank you. Thank you. Bye bye.
operator
Thank you very much. Due to time constraint. That was the last question. I would now like to hand the conference over to Mr. Ajay for the closing comments. Thank you. And over to you sir.
Ajay Kanwal
Thank you so much. Thanks everyone for attending and your questions. I hope you’ve addressed them well. In closing I just want to tell a few things which are very important. First is universal bank is very important. It’s a very big change for the bank. And we’ll continue focusing and making sure that we do everything that we can to get a positive response. Second, MFi did Fox us. We didn’t anticipate MFI will continue longer. We do remain conservative on mfi. We are conscious that our remaining conservative may give us a bit of less income. But I’d rather have that solved today rather than for income grow my MSI book and then regret again next year.
So we as a management team think that is the best and safer path and a more longer term path to go by that won’t shift. Third, our secured book is doing extremely well. We continue to grow that handsomely. It’s performing very well. And we do think that this MFI stress is only making us feel the faster we move to an 80% secured with the balance unsecured book as guaranteed, I think we’ll be in the best position as a bank. It does mean that we will have a few tough questions from you folks, which we’ve had in this quarter and the last quarter.
But rest assured, we are very determined to make sure that we do build a very strong and resilient bank. Thank you so much.
operator
Thank you. On behalf of YCICR securities limited that concludes this conference. Thank you for joining us. And you may now disconnect your lines.